Idaho insurance pool struggles to stay solvent

adutton@idahostatesman.comNovember 17, 2012 

Nearly 40 Idaho cities are facing a 55 percent increase in health insurance premiums because a pool insurance program they joined earlier this year was hit unexpectedly with large medical claims.

They have until December to make up a $1.5 million shortfall, after the Idaho Department of Insurance warned that the pool didn’t have enough money in reserves to stay solvent.

A dozen cities agreed to prepay six months’ worth of premiums to help the pool cross that line.

Cities big and small joined the Idaho Independent Intergovernmental Authority program in March, in hopes of lower annual insurance premiums.

The program, patterned after a similar one in Montana, also promised cities more bargaining power.

Cities signed up with the group program after leaving more traditional insurers like Blue Cross of Idaho.

But the new group received 11 claims in the first 40 days of operation that hadn’t been calculated into the first-year business model, the Post Register reported this week. So pool members have had to kick in extra to shore up the reserve account.

Member premiums increased by 19 percent in September and will rise 36 percent in January.

“Basically the story is, we had more people who got sick right off the bat than we thought,” said Gary Marks, chairman of the pool’s board of directors and Ketchum’s city administrator. “We know it’s an anomaly because claims have receded down dramatically (since).”

There are 39 cities taking part in the pool, including Fruitland, Burley, Jerome, Hailey and Ketchum. About 2,400 people were covered as of this month, including 850 employees.

Rigby officials dropped their city’s coverage with Blue Cross of Idaho this year because they thought they could get a better deal for their 20 employees. But with the premium increases, the pool could cost Rigby significantly more over time.

City Clerk Dave Swager said Rigby was quoted $9,904 per month by Blue Cross but will pay $15,662 per month through the pool when the January rate increase takes effect.

Swager said Rigby officials tried to back out of the pool when the problems hit, but could not do so without paying a large financial penalty that includes one year’s worth of premiums.

Swager said he hopes the pool will be liquidated so Rigby can rejoin Blue Cross.

“We’re definitely concerned,” Swager told the Post Register. “We can’t afford $15,000 a month in premiums versus $9,000 in premiums.”

But Marks and some officials in member cities still see the value and potential benefits of the program. Even with the 36 percent increase, the pool will continue benefiting St. Anthony, City Clerk and Treasurer Patty Parkinson said.

Before joining the pool, St. Anthony employees paid rates adjusted for sex and age, causing the city’s insurance payments to fluctuate widely, depending on the employee. As a member of the pool, the city pays a flat rate of $409.15 per month per employee, about $121 less than the age-variable plan under Regence Blue Shield.

“For us, it’s been a good thing because we’ve been able to maintain the plan we’ve always had,” Parkinson said. “It’s leveled out (our rates) and made it a little more predictable.”

Marks is hopeful, noting the Montana pool now has $9 million in reserve and 76 member cities. He also said some members hadn’t seen an increase in their previous plans’ rates in two years, Marks said.

“I think we’re headed in the right direction now,” Marks said.

Audrey Dutton: 377-6448, Twitter: @IDS_Audrey

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